Efforts to reshore electronics manufacturing from overseas often overlook the critical role of the supply chain. The Covid-19 pandemic was a painful reminder that domestic factories can’t operate if they lack a key component or material that’s sourced half a world away. This is most evident in the case of rare earth elements, or REEs, the majority of which are procured from China.
It takes a great deal of investment and commitment among manufacturers and suppliers to localize or regionalize a supply chain. In the Americas, developments in the automotive battery and solar sectors indicate such efforts are making headway.
USA Rare Earth plans to build a manufacturing facility in Stillwater, OK, that will convert rare earth oxides into metals, magnets and other specialty materials. These products have numerous applications, including electric vehicles (EVs), wind turbines, mobile electronic devices and military hardware.
In Pittsburg, OEM Nextracker and BCI Steel have re-opened a factory that will produce solar tracker equipment for large-scale solar power plants. The factory will utilize new and reshored equipment from BCI and serve growing solar markets in Pennsylvania, Indiana, New York, and Ohio.
Most of the material going to the Stillwater facility will be mined in Texas where USA Rare Earth owns and controls the Heavy Rare Earth, Lithium and Critical Minerals Project, said Brent Kisling, executive director for the Oklahoma Department of Commerce. “This is a vertically integrated factory where raw product will be coming in from parts of the U.S. to be processed and turned into different products including those for electronics.”
This type of model is key to building a wider onshoring/nearshoring movement, according to business consultant A.T. Kearney: “More companies are looking at each other to assess if there will be enough critical mass in a redefined reshoring movement to build a supplier ecosystem, either domestically or in a nearshore location, that can rival what China has built.”
Selten Metal, headquartered in Canada, recently returned samples of 15 REEs from its THOR Heavy & Light Rare Earth project in Nevada, including the four most in-demand elements used in EVs, smart devices, medical hardware and defense systems. The THOR project can potentially secure REE supplies for North America, said Jenny-Claire Ganasi, CEO of Selten Metal, in a release.
Why REEs matter
Oklahoma has historically produced petroleum and agricultural products but has moved into aerospace and sustainable energy. “In the last decade we have made the transition to aerospace and that has lead to automotive — we were one of the finalists for Tesla’s last gigaplant,” said Kisling. “With new electric vehicles manufactured here, that brings in the rest of the supply chain. We have a huge battery rehab and recycling center located here, so with the recycling of batteries, the REEs fit really well with what we are trying to do to shorten the [automotive] supply chain.”
REEs, a series of 17 elements, are critical to the renewable energy sector and batteries in particular. Due to their unique chemical properties, REEs are key to technologies spanning a range of applications, including smartphones, batteries and defense technologies. They are also used in renewable energy technologies, like wind turbines and solar panels.
While the amount of material used in products is tiny, importing REEs from China makes the U.S. vulnerable to boycotts or other measures the nation may take in retaliation to U.S. trade or political policies.
The Stillwater REE facility also fits well into Oklahoma’s efforts to provide electricity for a good part of south central U.S. and its expansion in to renewables. Oklahoma is second in the nation in wind energy production and installed capacity – attractive to automotive factories that plan to operate with sustainable energy sources, said Kisling. “There are 6 major automotive battery companies and 4 are are looking to construct battery manufacturing facilities in the United States,” he said. The Stillwater announcement has stirred the interest of other companies processing and refining REES, he added.
Oklahoma has a number of incentive programs to attract businesses to the state. Its Quality Jobs program promotes job growth and injects cash back into business as they expand. Small businesses and employers of highly skilled workers can receive tax and investment credits. Kisling notes that the University of Oklahoma is close to a number of industrial centers, and the state provides tax credits for workers that accept STEM jobs and for students that specialize in that field.
The Covid-19 pandemic prompted the development of an online statewide supply chain network for manufacturing and service companies. In an effort to secure PPE, Oklahoma assembled an online database of suppliers in the state. As the pandemic waned, the directory expanded to more goods and services. Oklahoma now has a database of 3,500 local manufacturers.
“It’s about the small manufacturer that imports a widget from China that has a hard time getting it. They can see if that widget can be manufactured locally,” said Kisling. Users can input any number of dimensions – materials, products, prices or specs – and search for matches.
A.T. Kearney notes that companies are re-evaluating the dynamics of reshoring to include key elements of the supply chain. Rather than the classic “all eggs in one basket” approach, businesses will leverage models where components and materials supplies are nearshored and final automated assembly and testing is done in the Americas. “It’s an evolving definition that allows manufacturers to source a portion of their materials and components in nearby locations such as Mexico, Central America, and even Canada while still being able to say their products are manufactured in the United States,” Kearny reported.